Cities, Towns, and Poverty: Migration Equilibrium and Income Distribution in a Todaro-Type Model with Multiple Destinations

24 Pages Posted: 25 Apr 2017

See all articles by Luc Christiaensen

Luc Christiaensen

World Bank

Joachim De Weerdt

University of Antwerp - Institute of Development Policy and Management; KU Leuven - Centre for Institutions and Economic Performance (LICOS); Economic Development Initiatives (EDI)

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Abstract

Should public investment be targeted to big cities or to small towns, if the objective is to minimize national poverty? To answer this policy question we extend the basic Todaro-type model of rural-urban migration to the case of migration from rural areas to two potential destinations, secondary town and big city. We first derive conditions under which a poverty gradient from rural to town to city will exist as an equilibrium phenomenon. We then address the policy question and show how the answer depends on the migration response, where the poverty line lies relative to incomes in the three locations, and at times also the poverty index itself. In particular, we develop sufficient statistics for the policy decisions based on these income parameters and illustrate the empirical remit of the model with long running panel data from Kagera, Tanzania. Further, we show that the structure of the sufficient statistics is maintained in the case where the model is generalized to introduce heterogeneous workers and jobs. Overall, the findings confirm that, given migration responses, national poverty outcomes are not immune to whether urban employment generation takes place in the towns or the city.

Keywords: secondary towns versus big cities, poverty reduction, poverty gradient, Todaro model, migration equilibrium, equilibrium income distribution

JEL Classification: O18, O41, I3, J61

Suggested Citation

Christiaensen, Luc and De Weerdt, Joachim and Kanbur, Ravi, Cities, Towns, and Poverty: Migration Equilibrium and Income Distribution in a Todaro-Type Model with Multiple Destinations. IZA Discussion Paper No. 10692. Available at SSRN: https://ssrn.com/abstract=2956787

Luc Christiaensen (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Joachim De Weerdt

University of Antwerp - Institute of Development Policy and Management ( email )

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Lange Sint Annastraat 7
Antwerp, 2000
Belgium

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

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Leuven, 3000
Belgium

Economic Development Initiatives (EDI) ( email )

P.O. Box 393
Bukoba
Tanzania

HOME PAGE: http://www.edi-africa.com

Ravi Kanbur

Cornell University ( email )

301-J Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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